"... America has gotten itself into a vicious cycle with respect to higher education financing that goes like this: In year 1, tuition goes up fairly substantially. Political pressures build to 'do something' about the increases. Congress expands guaranteed student loan programs to make education more affordable, in turn increasing the demand for education and allowing universities in year 2 (or year 3, depending on the lag) to raise prices further. The result is a further expansion of student loan programs, state scholarship efforts, and other third-party funding."

Between 1994 and 2005, financial aid payments increased by 11 percent per year. This huge subsidy has permitted colleges and universities to increase their already exorbitant tuitions, but has not, Vedder argues, resulted in increased quality. Administrative staffs have ballooned, undergraduate instruction has been shortchanged, and salaries for faculty have doubled since 1980. To his own surprise, Vedder also found that increasing state support for institutions of higher learning not only does not result in greater economic growth, it is actually a net loss.